TyroCity: Business Studies XI Notes

Business Studies XI

Business Studies XI Notes — Sun, 18 Aug 2013 05:41:42 +0000

Unit 1 and 2

Unit 1: Introduction to Business

Unit 2: Evolution of Business

Unit 3 Forms of Business Organizations

Sole trading concern

Partnership firm

Joint stock company

Cooperative organizations

Public enterprises

Multinational companies

Business support agencies in Nepal

Unit 4 to 8

Unit 4: Office Management

Unit 5: Filing and Index

Unit 6: Record Management

Unit 7: Office Machines and Furniture

Unit 8: Business Communication

Office machine : meaning and importance

Business Studies XI Notes — Sun, 18 Aug 2013 05:41:42 +0000

Office machine
The rapid increase in the industrial activities has increased office work to the highest level. The machines were invented to reduce monotony and increase the efficiency of works done. They help to save time and labor. In modern offices, business completely depends upon the office machine and equipment. It increases the level of operation, improves the performances, safeguards the files, and increases the accuracy. Purchase, repair and maintenance of office machines require big investment. It is the duty of office manager to select the right type of machine. If they don’t select it properly then the office work won’t be efficient and effective.

Importance of office machine

1. To save labor: properly designed office machine saves labor. It helps in saving labor cost. Machines work faster than men. Total wage bill can be reduced.

2. To save time: machines work faster than men. The office machine helps to save time. The speed of official work is increased with the help of machine. It helps in completion of work in a faster way. It increases efficiency and effectiveness of work.

3. To provide accuracy: office machines works accurately. It increases in accuracy in all types of works. It reduces the error, fatigue and helps in supervision

4. To reduce chance of fraud: there may be barrier inside the organization. Machines help to check for the accuracy and correct method of works done t also keeps systematic records of all employees. Thus, it helps in reducing the fraud

5. To retrieve monotony of work: some jobs are routine in nature. They are repetitive in nature. Repetitive works are monotonous. Office machine s help in retrieving the monotony of the employees

6. To improve quality of work: office machines help to maintain the neatness, accuracy and quality of work done.

7. To increase goodwill: when there is saving of labor and time and increment of accuracy of works done, then there are fewer chances of errors and fraud which improves the quality of work done and helps in satisfaction of customer and the employees. This helps in increasing the goodwill of the office

8. To lower operating cost: office machines reduce the operational cost. It helps to reduce the wage bill. It also helps in reducing the excessive filing cost.

Requisites of business success

Business Studies XI Notes — Sun, 18 Aug 2013 05:41:42 +0000

Establishment of objectives:
There must be proper establishment of objectives. Objectives are the aim of business. It determines the scope of future work. Objectives must be clearly defined. It provides guidelines for doing work. Objectives are defined for long term and short term.

Proper planning and policy:
Proper planning classifies the works done. Planning and policy formation should be done in efficient way. There must be clear set of policies and programs to complete the work. It helps in minimizing risk and maximizing profit.

Proper location layout and size of business:
Proper location layout and size of business is needed for progress of business. Layout means planting the business in such a way that production work can be carried out with efficiency and true manner. It helps in determination of proper size of business. Location also should be suitable. It must attract the market.

Sound organization:
There must be division of work among employees. There must be effective use of human sills and knowledge. Organization should help to answer various business problems. It ensures team work. It must ensure the best communication channels for proper decision-making.

Separate finance:
Finance is the blood of business. Business can’t be established without sufficient capital. Volume of capital to be invested is dependent upon size of business firm. Source of capital must be properly taken into consideration. It must be flexible. It should be suitable for both long term and short term business.

Efficient management:
Its main objective is to manage all activities of human and other resources. It must perform right job at right time in right place. It must use effective management technique.

Employees morale:
The success of business depends upon employee’s morale. The business should be used with intensity of employees. Employee should be encouraged, motivate. They could complete their work heatedly.

Modern technology:
It brings/ uses modern technology. It provides new idea and methods in production process. There should be proper labor and capital adjustment.

Research:
It helps in improvement of product. It works under the taste, desire and preference of the customers. In it various marketing, strategies, skills, knowledge and experts are used. Research and development is the main way to achieve profit with customer satisfaction.

Agenda and Resolution

Business Studies XI Notes — Sun, 18 Aug 2013 05:41:42 +0000

Agenda

It is the most important base for all meeting. It includes the subjects to be discussed in the meeting. It is prepared with consultancy of chairman. Its main objective is to conduct meeting in a systematic way without missing any item. It is the deal about the subject mater of the meeting and is informed to all meeting members. It allows the member to have sufficient time in preparation of their own matter of discussion on the topic of the agenda before the meeting.

Resolution

Resolution is all the activities of company which are conducted after the resolution is passed in various meeting of shareholders and directors. All the decisions that are taken in the meeting are in the form of resolution. It can be defined as the resolve to do or not to do things. When any proposal is accepted by required majority in the meeting then the proposal becomes resolution. There are two types of resolution. They are

1. Ordinary resolution
It is passed by simple majority of member present a general meeting. Majority is taken by voting. For this purpose, in this meeting, in the public company, there must be presence of 50% share with at least 3 shareholders are presented. It cannot be held due to quorum

They are passed for following purpose

Profit and loss account
Balance sheet of previous years
Declaration of dividends
Appointment of directors and auditors
Salary and facility for directors and auditor

2. Special resolution
The resolution requires passing 75% majority of members. It must be submitted to take decisions for following matters

Increasing authorized capital of the company
Decreasing the share capital of the company
Altering name or objective of the company
Issuing bonus shares
Selling shares at discount
Converting private company into public company or vice versa

Business environment : concept and components (internal and external)

Business Studies XI Notes — Sun, 18 Aug 2013 05:41:42 +0000

Business establishes, grows or operates and dies in environment. It exchanges resources in environment. It collects inputs i.e. Man money, materials, machines etc. And provides output i.e. Goods and services in the environment. Environment means surrounding. Business environment defines as a force that affects on organizational performance. It includes internal an eternal factors. It provides opportunities and threats.

1. Internal environment
It is defined as all the forces or conditions that are available within an environment that affects on organization and business. It is also known as controllable factors because business can control them. It includes

Employees:
Business hires employees. It is the major internal factor. It works inside the business. It can be controlled by the business. Employees differ in skill, knowledge, morality, and attitude and so on. When managers and employees have difference in goals and beliefs then conflict may arise. The task of management is to divide the work and assign the work to the suitable employee and handle the conflict.
Shareholders:
Management deals with many shareholders. Shareholders have the right of ownership, power of management and voting right. The actual management of organization is carried out by elected representative of shareholders jointly known as boar of directors. Boards of directors have the responsibility of overseeing the management of organization. It plays the major role in formation of objectives, policies, strategies of the organization as well as their implementation.
Organization structure:
It is located inside the organization. The arrangement of various facilities, pattern of relationships among the various department, responsibility, authority and communication is the organization structure. It also included specialization and span of control.
Organization culture:
The sets of values that help the members to understand what organization stand for how it does work, what it considers, cultural values of business forces of business and so on. It helps in direction of activities.

2. External environment (PEST)

All the forces and condition that cannot be controlled by the business is called external environment. It is also known as uncontrollable factors because business can’t control them. It is located outside the business. It affects on organizational performance.

It includes:

Economic environment:
It indicates the condition of economy in which business organization operates. It has continuous and great impact on business. It includes national income, production, inflation, savings, investment, price, government activities. Business person must have constant watch on this factor.
Political or legal environment
It is defined as rules and regulations determined by the government. Business must fulfill demand of government. There should be non violation of rules and regulation of government. Business should avoid unfair trade and should provide essential information to the government.
Social environment:
Business must have good environment where a business can be established neatly. Business also helps in employment opportunities generation. There should be socio-cultural understanding and application of anti pollution measures.

Technological environment:
It defines about the methods available for converting resources into product or services. It transforms inputs into output. Input means material, capital, man, machine. It affects on business. It helps to change the level of job, skill, and product and so on. There can be innovation, development of scientific techniques which encouraged mass production and distribution.

Characteristics of Business

Business Studies XI Notes — Sun, 18 Aug 2013 05:41:42 +0000

1. Human activities:
Business cannot be performed without human efforts. The main aim of business is to produce goods and services to fulfill the requirement of human being internally associated in the production or the consumers.

2. Economic activities:
It is concerned with earning profits and generating wealth, which are measured in terms of money. Economic activities include production of goods and services, distribution of goods and services and the benefits generated from them.

3. Production of goods and services:
The main feature of business is to produce goods and services. Business is concerned with the production of goods and services to the society. In this process we get goods from shopkeeper, shopkeeper gets from wholesaler. The wholesaler gets from manufacturers. The shopkeeper, the wholesaler, the manufacturer are doing business to earn profit.

4. Risk and uncertainty:
There is no business if there is no risk but accidents never knock the door. In future anything may happen. So risk is a possibility that losses may occur. Introduction of new product, change in government policies, change in customer taste and preference etc are the risks.

5. Profit motive:
Business has the main aim to earn profit. To get maximum profit revenue of business should be maximized. Profit generation is vital for business survival and expansion. However, profit should be earned through legal and fair means and in ethical manner. Profit is the reward for the investors.

6. Continuous process:
Continuous process means to provide goods and services by the business to the customers continuously and regularly. In business, the exchange of goods and services is a regular feature. A businessman regularly deals in a number of transactions and not just one or two transactions.

7. Satisfaction of customers:
The aim of business is to satisfy human demands by producing quality of goods and also to supply right product in right time at right place to meet the right needs. Quality goods should be provided at reasonable price.

8. Finance:
Finance is known as “life blood” of business. Business needs investment of capital and to run smoothly. For regular and continuous business finance is needed, finance includes purchase of raw materials, payment of wages, assets of business and so in.

9. Organizing:
It means integration of all activities. Co-ordination is very important for organizing. Allocation of limited resource, assigning job, authority and responsibility also comes under organizing.

Characteristics of joint stock company

Business Studies XI Notes — Sun, 18 Aug 2013 05:41:42 +0000

Compulsory incorporation:
A company is a voluntary association of persons formed and incorporated under the existing Corrine law. Only when it gets certificate o incorporation it comes into existence as a body corporate.

Artificial person:
A company is an artificial person created by law. It is created by legal process and not by natural birth. Even though it has no natural personality, it has legal personality. Therefore, it can enter into contracts, sue and can be sued, own property, appoint employees and borrow money like any other natural person.

Common seal:
Since a company is an artificial person having no physical features like a natural person, it cannot sign. Hence, every company by law must have a common seal in which its name is engraved. The common seal can serve as its signature. The common seal is fixed on all important documents and contracts which is witnessed by signature of two directors and countersigned by secretary where ever required. The common seal is kept under the custody of directors.

Perpetual succession:
Since every company has separate existence from its members, directors and employees, their death, insolvency or insanity will not affect its life and existence. Men may come, and they may go but a company remains forever. It can be wound up under the provision of the act.

Limited liability:
Usually the liability of members of a company is limited to the extent of uncalled or unpaid shares held by them. Their personal property cannot be seized to meet the company’s liability beyond the above mentioned liability.

Share capital:
The capital required by the company is raised by the issue of its shares. The share is a document that acknowledges the ownership of the company. The members who hold the share of a company can transfer its ownership to any other person, without the company’s permission.

Separation of ownership and capital:
In company organization the ownership and management are separate. The shareholders who are the owners do not take active part in the everyday affairs of the company. Instead, they elect their representative known as directors, who with the help of managers and employees manage the company. Thus, there is division of labor and specialization.

Legal entity:
Since the company is created by law, it has separate legal existence compared to its members. Therefore, the members cannot be personally held responsible for the acts of company and company cannot be held liable for the acts of the members.

Large membership:
The Company is owned by many members- maximum of 50 in the case of private limited company and unlimited number of member in the case of public limited company.

Characteristics of partnership firm

Business Studies XI Notes — Sun, 18 Aug 2013 05:41:42 +0000

Unlimited liability
Proprietor is liable for all the debts of the business. In case the assets are insufficient to meet the debts, the personal property of the proprietor can be attached.

Difficulty in transfer of shares
Partners cannot transfer their share without the consent of other partners. There may be conflict when done otherwise.

Higher capital
Many partners invest capitals and there is higher flexibility in capital because new partner can be agreed to be associated and investing can be increased.

Reduced risk
Partners have right to take part in management. They have the duty to bear risk with proportion too.

Association of two or more persons
It must be two or more person to enter into contract. Association of two or more persons can only create partnership. In association of two or more persons, maximum and minimum number of persons is not mentioned.

Agreement
It is set up by agreement between partners. It must be written and legal agreement so that it will reduce dispute.

Company meeting : preliminary general meeting, annual general meeting, extraordinary general meeting

Business Studies XI Notes — Sun, 18 Aug 2013 05:41:42 +0000

Company meeting
Company is an artificial legal person. It is not capable to think or decide any important matter. But through meeting it can think and easily make any decisions. Meeting means gathering of people who are connected with the company for discussion in certain place. It can be defined as assembly of number of person for predominated purpose and by previous notice for discussion and decision on the same business matter.

Types of meeting

General meeting
The meeting of shareholders is known as general meeting. The types of general meeting are

1. First or preliminary general meeting
First official meeting of shareholder is known as first general meeting. It is also known as preliminary general meeting. It must be conducted within one year after receiving certificate of commencement of business. It occurs only once in the lifetime of public company. Its main aim is to give details of company to all shareholders about the number of shares issued. Share holders must be pre-noticed about place, time, date and agenda in advance of 21 days of conducting the meeting. Following things are discussed in the meeting.

Authorized capital
Number of share
Issued share capital of company
Paid up capital
Total amount of installment paid
Loan borrowed from any bank
Financial institution
Name and address of current director

2. Annual general meeting
It is held in each financial year within six months from the date of expiry of its financial year. It is held to inform shareholders about progress of the company, about the ongoing performance and future plan of company. Share holders must be pre-noticed about place, time, date and agenda in advance of 21 days of conducting the meeting. Following things are discussed in the meeting

Annual financial statement
Audit and directors report
Matter related to the distribution of dividends
Appointed of any directors
Appointment of any auditor

The information and report may be printed in newspaper too. If any shareholder request for the copy of annual financial statement, director’s repost and auditor report then company should provide it.

3. Extra ordinary general meeting:
If any important matter arise and it should be discussed sooner and can’t be waited till the annual general meeting then this meeting is held. It is also called special circumstances and is held when special and urgent decisions have to be made. Share holders must be pre-noticed about place, time, date and agenda in advance of 15 days of conducting the meeting. This meeting is conducted by

a. By board of directors
In case of emergency

b. By auditor

In auditing the account there can be need of shareholder’s idea and so auditor calls this meeting with a reasonable cause
In case BOD fail to call meeting then auditor may submit application to company registrar offices for stating reasons about not conducting meeting.

c. By shareholder
10% of paid up capital or at least 25% of total shareholders demand to call this meeting with reasonable cause. They request to board and submit application. If there is no meeting within 30 days then application is submitted to company registrar with reasonable reason. Then registrar office can call a meeting.
Extra ordinary general meeting is called for following purposes

Increasing authorized capital of the company
Decreasing the share capital of the company
Altering name or objective of the company
Issuing bonus shares
Selling shares at discount
Converting private company into public company or vice versa

2. Board of directors (BOD) meeting
It is also called meeting of directors. Board means collective name for directors. When directors of company come together to determine its policy and to take decisions according to its act then the meeting of BOD is called. It is held at regular interval. In public company it is held when there is attendance of 51% of total number of directors. Its main agenda are management of company about share, recommendation of dividend, appointment of officers and fixation of data. Decisions are taken by passing resolution. If any director is not satisfied with decision then s/he can write the note of dissent of proof of his rejection.

Component of Business

Business Studies XI Notes — Sun, 18 Aug 2013 05:41:42 +0000

Scope of business
Business covers wide area and all economic activities. It also includes all types of industry and commerce. Industries are related to the activities of production of goods and services and commerce is related to distribution of goods and services from producers (industries) and customers.

Types of industries

1. Genetic industries:
Genetic industries are also called heredity industries that involve in production of goods from plants and animals to earn profit. Those industries which produce medicines from herbs, perfume from flowers, milk and meat form animals are called genetic industries

2. Extraction industries:
Industries that are involved in extracting the resources from the sources of nature are called extraction industries. It supplies the raw material to other industries. These types of industries are generally based in mining, fishing etc.

3. Construction industries:
Those types of industries which are related to construction of different infrastructures are called construction industries. They basically construct road, bridges, houses and so on . It helps in development of country

4. Manufacturing industry:
It is related to produce finished goods. It processes raw materials into finished goods. There are mainly 4 types of manufacturing industry they are:

Analytical industry:
It is an industry which produces goods by analyzing raw materials in scientific way. In this industry various goods ate purchased by single material. For example dairy product (milk, ghee, butter, ice cream from milk)
Processing industry:
The industry which is involved for production of goods and services by using different steps or stage is called processing industry. For example for processing cotton into thread the processes of spinning, weaving, dying, bleaching is used.
Synthetic industry:
The industry which is involved for using various raw materials to produce a single good is called synthetic industry. For example to produce cement limestone, red soil, chemicals etc are used.
Assembling industry:
The industry which is involved for production of goods by combining different parts which are already manufactures by different industries is called assembling industry. For example TV, computer, mobile, watch manufacturing industries.

Commerce:
It is related with buying, selling and exchanging of goods and services. It is related to economic activities to earn profit. The role of bridge between manufacturer and customer is played by commerce

Types of commerce

Trade:
Trade is related to buying and selling goods and services for earning profit. It supplies quality goods with reasonable price. Those activities which are related to buying, selling and distributing goods in market is known as trade

Types of trade

1. Home trade:
Home trade means national, domestic or internal trade i.e. Buying and selling within a nation. In home trade both buyer and seller are from the same nation. In home trade task is simple than foreign trade. It is classified into two types they are.

Wholesale trade:
When trader buy goods in bulk amount and resell to retail in small volume is called whole sale trade. In this trade goods are bought from manufacturer and are sold to retail. It acts as a middleman between manufacturer and retailer. It deals with special product
Retail trade:
When trader buy goods in bulk amount and resell to customer in small volume is called retail trade. In this trade goods are bought from wholesaler and are sold to customer. It acts as a middleman between wholesaler and customer. It deals with various types of product.

2. Foreign trade:
Foreign trade means international, global, external trade i.e. Buying and selling is between two or more nation. In foreign trade buyer and seller are from different nation. In foreign trade task is difficult than home trade. It is classified into three types they are.

Import:
A good or service brought into one country from another is called import. Along with exports, imports form the backbone of international trade. The higher the value of imports entering a country, compared to the value of exports, the more negative that country’s balance of trade becomes. Buying goods from India, china is called import.
Export:
A good or service sold to another country from one is called export. Along with imports, exports form the backbone of international trade. The higher the value of exports exiting a country, compared to the value of imports, the more positive that country’s balance of trade becomes. Exporting herbs, garments to Germany, India is the example of export
Entry port:
The trade in which a country purchases the goods from one country and sells it to another country is called entry port trade. The goods bought from a country is not used for self benefit but is rather exported to another country. For example India buys herbs from Nepal and sells it to china.

Auxiliaries of trade:
It supports or assists the trade activities. It helps to run business smoothly. It helps for transfer goods from production area to consumption area. It creates time and place utility.

1. Transportation:
It transfers goods from one place to another. There are many means of transportation that can assist business and trade activities. They are air travel. Bus route, sea route, rope route etc. It delivers right product and right time in right place. It creates time utility

2. Warehouse:
It is one of the auxiliary of trade. It helps to protect and store goods until customers uses them. It provides the goods then demand is created. It also helps to provide unseasonal goods.

3. Insurance:
It acts as nutrition to trading activities. It helps to reduce risk and uncertainties. It is a contract between organization and their future. The system that takes the responsibility of compensation of certain risk is called insurance system.

4. Banking:
Banks are the financial institution that supports for traders. It provides loan, investment, credits facilities to the trading companies. It helps for expansion and flexibility of trade.

5. Advertising:
It is a supporter to trade. It provides information to customer about goods and services. Its aim is for creation of demand. It also acts as a promotional tool.

Concept of an office

Business Studies XI Notes — Sun, 18 Aug 2013 05:41:42 +0000

Definition of an office

Office is an important pace of the organization where different functions are performed to achieve the objectives of the organization. It is the integral part of any business. If business starts to be rigid and complex, office helps by simplifying the activities and promotes the expansion of business. It is set up to handle the information and daily transactions in s systematic way. The definition of office can be interpreted in two ways. They are traditional and modern viewpoint. In traditional view, office is defined as the place where clerical functions like receiving, recording, processing and supplying information are performed. In modern view it is defined as the part of organization which involves in performing all management as well as administrative functions such as planning, policy making, organizational activities, coordination and communicating in order to achieve the objectives of the organization.

Features of cooperative organization

Business Studies XI Notes — Sun, 18 Aug 2013 05:41:42 +0000

Features of cooperative organizations are as detailed below:

1. Voluntary association and open membership
It is voluntary association in which membership is open for all people with common interest. People can come together to satisfy the needs with common effort. In Nepal at least 25 members are required for establishment of cooperative organization.

2. Equal voting right
It is based on democratic principle. It is based on equality of status of all members. Decisions and other bills are passed on the basis of majority votes.

3. Democratic management
Management is always in democratic lines. All member of organization elect its managing committee. One man can give only one vote. Managing committee will then work for common benefit of all members.

4. Service motive
Its objective is to provide service to member. It’s not profit motive. Its aim is not to earn maximum profit as in all form of organization. Even though it can earn profit by extending their services to non members but they collectively work for service.

5. Legal existence
In Nepal, these types of organizations are established under cooperative act. There must be at least 25 members and they all must be guided through common objective

6. Cash transactions
In this type of organization transactions are done only through cash. There are no credit transactions. It eliminates bad debt too.

7. Disposal of surplus
It is service motive. Even though it can make surplus, the surplus amount is used for extending the surplus facility.

8. Education
The success of organization depends upon the education of its members. They should be constantly educated with objectives.

9. Liability
Liability of member is limited. It should use the word “ltd” after its name.

10. Government control
The organization must follow the rules and regulations of the government.